1

100% of Electric Capacity Added in U.S. in

January, 2013 Was Renewable The Federal Energy Regulatory Commission, the agency that announced that almost

half of all new electricity generating capacity added in the U.S. in 2012 was renewable,

has released its data for the month of January, 2013.

http://www.ferc.gov/legal/staff-reports/2013/jan-energy-infrastructure.pdf

Myth: CO2 Emissions Down Because of Natural Gas Use

2 http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/15/natural-gas-isnt-the-only-reason-u-s-carbon-

emissions-are-plummeting/

Why Did CO2 Emissions Decrease?

3

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/15/natural-gas-isnt-the-only-reason-u-s-carbon-

emissions-are-plummeting/

Why Did the Carbon Intensity of Energy Decrease?

4 http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/15/natural-gas-isnt-the-only-reason-u-s-carbon-

emissions-are-plummeting/

New Renewables Were Major

Source of Reduction, not Natural Gas

5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

1 10 20 30 40 50

Maxim

um

WT

W G

as L

eak,

%

Years to Net Climate Benefit

Maximum “well-to-wheels” (WTW) natural gas leak rate versus number of years needed to achieve net climate benefit for

electricity generation: coal vs. natural gas

Petron et al. 2012, measured best estimate

Service Life, Alvarez et al., 2012

Service Life, Present Study, 2012

EPA range, estimated (conventional and shale)

EPA , 2009 U.S. gas mix

6

7

8

9

10

11

Location of Current Large-Scale Wind Farms in the U.S.

12 http://www.thewindpower.net/country_maps_en_4_usa.php

13

“According to a survey of completions performed by the MSC members

in 2011, more than 80 percent of completions were either produced to a

pipeline or shut-in while awaiting the installation of a pipeline. The

remaining completions were flared, with only one well being vented.

This illustrates that MSC members companies are in full compliance

with EPA’s “reduced emission completions” guidance before the agency

mandated this practice last year and set to go into effect in 2015.”

FOR IMMEDIATE RELEASE Contact: Patrick Creighton; Travis Windle February 12, 2013 | PERMALINK @MarcellusGas | 412.706.5160

Additionally, and as recently noted by EPA, nationwide air emissions are

down 8 percent; and across the Mid-Atlantic region, which include Marcellus

Shale-producing states, emissions are down 13.8 percent. Importantly, this

significant improvement in air quality coincides with increased development

and the expanded use of natural gas, evidencing further the clear

environmental benefits of this abundant, clean-burning resource.

14

Observed Extent of Arctic Sea Ice:

30-Year Average and 2012

From NASA

30-year

average 30-year

average

15 http://www.blackoakwindny.com/

Putting My $$ Where My Mouth Is

Black Oak Wind Farm Ithaca, NY: Online 2014

16

17

18

Fuel Type

Projected Changes in Fuel

Cost, 2009-2030

(2009 dollars/MMBTU)

2009

2030

Percent Change Gasoline – all grades

$19.30

$40.39

109%

Natural Gas - Electric Natural Gas – Residential

$6.30

$13.58

$10.14

$16.19

27%

19%

Natural Gas – Commercial Natural Gas – Industrial

$10.27

$8.73

$13.06

$11.98

27%

37%

Projected Unit Costs of Selected Conventional Fossil Fuels

Over the Period 2009-2030 in NYS.

Source: NYSEPB (2009), Energy Price and Demand Long-Term Forecast (2009-2028). Annual

growth rate factors provided in reference document have been extrapolated for the period 2029-2030.

Externality Costs for Fossil Fuel Generation

The hidden costs of:

• Air pollution morbidity and mortality

• Water pollution costs

• Global warming damage. e.g. coastline loss, agricultural and fish losses, human heat stress mortality, increases in severe weather and air pollution

• Worker health

19

20

Energy Technology

2005-2012*

2020-2030*

Wind Onshore

4a -10.5b

≤ 4a

Wind Offshore

11.3c -16.5b

7b-10.9c

Wave

>11.0a

4-11a

Geothermal

9.9-15.2b

5.5 -8.8g

Hydroelectric

4.0-6.0d

4a

CSP

14.1-22.6b

7 -8a

Solar PV (Utility)

11.1-15.9b

5.5g

Solar PV (Commercial Rooftop)

14.9-20.4b

7.1-7.4h

Solar PV (Residential Rooftop)

16.5-22.7e

7.9-8.2h

Tidal

>11.0a

5-7a

New conventional (plus externalities )f

9.6-9.8 (+5.3) =

14.9-15.1

12.1-15.0 (+5.7) =

17.8-20.7

Approximate fully annualized generation and short-distance

transmission costs for WWS and new conventional power

(2007 U.S. cents/kWh-delivered), including externality costs.

The plan would:

• Reduce NYS’s end-use power demand ~37%.

• Stabilize energy prices since fuel costs would be zero.

• Create more jobs than lost because nearly all NYS energy would

now be produced in-state, ~58,000 new, permanent, full-time jobs by

2025.

• Reduce NYS air pollution mortality and its costs by ~4000/yr,

and ~$33 billion/yr (3% of 2010 NYS GDP), respectively, repaying

the 271 GW installed power needed within ~17 y.

• NYS’s own emission decreases would reduce 2050 U.S. climate

costs by ~$3.2 billion/yr.

21

NO to HVHF, YES to a Much Better Plan

The Industry/Regulator/Legislator Merry-go-Round

22

Former Pa. counsel to handle Range's legislative, regulatory affairs

Feb 21, 2013 - Range Resources Corp. has selected Terry Bossert as vice

president of legislative and regulatory affairs for its Appalachia division, the

company announced yesterday. Bossert is the former senior vice president of

regulatory and government affairs for Chief Oil & Gas LLC and ex-counsel to

the Pennsylvania Department of Environmental Protection. He will report

to Scott Roy, former deputy chief of staff to Pennsylvania Gov. Ed Rendell

(D), who left office in 2009.

23

Feb 22, 2013 - In the third day of budget hearings Thursday, …Sen. Jim Ferlo, D-

38, voiced surprise that nine of every 10 violations cited by DEP inspectors at

Marcellus Shale gas wells in 2011 resulted in no fines. “How do you reconcile

that?” the Pittsburgh lawmaker asked. “The idea of an issuance of a notice of

violation is not to issue a fine. The idea is to bring conduct which is potentially

volatile to the attention of the operator so the operator can do something about

it,” Krancer said.

But that wasn’t enough for Ferlo, who is a member of the Senate Environmental

Resources & Energy Committee. “You’re the secretary of DEP and the citizens

are demanding that there be proper enforcement and proper citations to correct

the behavior of an industry that, in my opinion, has run amok, despite your

perception of the industry. Citizens feel very shortchanged right now,” Ferlo

said. “I’m sorry for that perception on your part. I think it’s an incorrect

perception,” Krancer responded.

http://www.phillyburbs.com/news/local/courier_times_news/dep-secretary-krancer-hit-on-marcellus-shale-smallmouth-

bass/article_446821c4-2d21-55d3-a497-d995674c994a.html

Regulations Without Strict Enforcement Are

Just Words on Paper

A Dispassionate View of the Industry.

24

“…oil and gas companies are not in business to steward the environment, save the

family farm or pull depressed areas out of economic decline. If these things should

by chance happen, they are merely peripheral to the primary mission of the

companies and certainly were never considered in corporate exploration and

production plans. Further, given shales’ steep declines and thus limited lives, such

benefits will be short-lived as well. It would be the height of naïveté to assume that

such companies have altruistic intent towards a region or its residents. They do

not. Oil and gas companies are in business to extract hydrocarbons as

cheaply and efficiently as possible and get them to the customer that will

pay the highest price. If they can shave dollars off already thin margins by

refusing to use pollution control devices then that is precisely what they will do if it

is not mandated, regardless of whether this will increase costs for a region due to

pollution or negatively impact other industries. Even though pollution and

degradation involve real costs, they are not borne by the industry that perpetrates

them in today's economic accounting. This is especially true of the oil and gas

industry as they are exempt from federal environmental protection statutes.”

Rodgers, Energy Policy Forum, February 2103

Why Is High-Volume Fracing from Long Laterals in Shales a Higher Risk to Public Health?

• Requires much higher well density, many wells per square mile.

• Requires much more industrial development over large areas, heavy equipment operating 24/7/365.

• Requires much higher volumes of fracing fluid, millions of gallons per well.

• Produces much higher volumes of waste fluids and solids containing hazardous materials: frac fluid chemicals, heavy metals, NORMS, NOx, VOC’s.

• Produces higher volumes of fugitive emissions of methane.

25

• As number of wells and volumes of waste increase, probability of accidental releases of hazardous materials into air and groundwater increases.

• Cumulative effects on air and water and health from these and from purposeful emissions into the atmosphere and releases into groundwater are unknown.

• Increased production, processing, storage, transportation and burning of natural gas and its liquid companions (e.g. ethane, propane, butane) increases emission of GHG’s, exacerbates climate change

26

Why Is Slickwater, High-Volume Fracing from Long Laterals a Higher Risk to Public Health?

FRESH WATER AQUIFER ZONE

SHALLOW PRODUCING ZONE

INTERMEDIATE PRODUCING ZONE

CONDUCTOR PIPE

SURFACE CASING

PRODUCTION CASING

GOOD MECHANICAL INTEGRITY

TARGET PRODUCING ZONE 27

CEMENT CHANNELING

PRESSURE BUILDS UP

CONDUCTOR PIPE

SURFACE CASING

PRODUCTION CASING

FRESH WATER AQUIFER ZONE

SHALLOW PRODUCING ZONE

INTERMEDIATE PRODUCING ZONE

TARGET PRODUCING ZONE

CA

SIN

G

CEM

ENT

FOR

MA

TIO

N

28

LEAK THROUGH CASING

CONDUCTOR PIPE

SURFACE CASING

PRODUCTION CASING

FOR

MA

TIO

N

CA

SIN

G

FRESH WATER AQUIFER ZONE

SHALLOW PRODUCING ZONE

INTERMEDIATE PRODUCING ZONE

TARGET PRODUCING ZONE

PRESSURE BUILDS UP

29

INSUFFICIENT CEMENT COVERAGE

PRESSURE BUILDS UP

CONDUCTOR PIPE

SURFACE CASING

PRODUCTION CASING

FRESH WATER AQUIFER ZONE

SHALLOW PRODUCING ZONE

INTERMEDIATE PRODUCING ZONE

TARGET PRODUCING ZONE 30

Observation: What Does This All Look Like “Downhole”?

Laboratory-Scale Experiment: • A Block of Real Rock

• Apply earth-like pressure to all 6 sides

• Drill It, Right Down the Middle

• Case It

• Cement It

• Perforate it

• Frac It, with Red Dye in the Frac Fluid

• Break Open the Block

• See What Happened

One Can See Perforations and Hydraulic Fractures

32

4 in.

Nobel Winner F. Sherwood Rowland: On The Responsibility of Scientists

33

“Is it enough for a scientist simply to publish a paper? Isn’t it a

responsibility of scientists, if you believe that you have found

something that can affect the environment, isn’t it your responsibility

to actually do something about it, enough so that action actually takes

place?”

“If not us, who? If not now, when?”

Rowland, at a White House climate change roundtable in 1997.

http://thinkprogress.org/romm/2012/03/12/442296/sherry-rowland-sounded-alarm-ozone-layer/#more-442296

34

Blowout Through Nearby, Unknown, Abandoned Well

Pearsall, Texas November, 2010

MYTH: You should not worry about mistakenly stimulating an abandoned well. ➣ "There are approximately 4,000

abandoned or unreported wells on

DEC's priority plugging list."

➣ "There are approximately 35,000

wells for which DEC has no records.“

NYS DEC, October 5, 2011

35

~1800 ft

~1500 ft MYTH: Fracs in shales stay in shale

Thickness of shale layer: 100-300 ft

Difficult to Keep Un-Natural Fractures “In Pay Zone”

36 Base Image Courtesy of Southwestern Energy

Hydrofracture Intersects

Existing Fault

Horn River Area, NE British Columbia

37

PA DEP Waste Production Database: 38 % of Frac Fluid Recycled in 2011

38

Industry claims of “nearly 100% recycling”

are not supported by DEP data

Drilling Rig Count in PA

39

0

20

40

60

80

100

120

140

Ap

r-0

7

Sep

-08

Jan

-10

Jun

-11

Oct

-12

Mar

-14

# o

f R

igs

Op

era

tin

g in

PA

Date

Drilling Rig Count in Ohio

40

4

6

8

10

12

14

16

18

20

22

24

Jul-09 Nov-10 Apr-12 Aug-13

# o

f R

igs

Op

era

tin

g in

Oh

io

Date

New Scientific Data on Methane Contamination of Water Wells

41 www.pnas.org/cgi/doi/10.1073/pnas.1100682108

The “New” Intermediate Casing Myth

Additional Well Casing to Prevent Gas Migration: In most cases, an

additional third, cemented well casing is required around each well to prevent

the migration of gas. The three required casings are the surface casing, the

new intermediate casing and the production casing. The depths of both

surface and intermediate casings will be determined by site-specific conditions.

42

43

As-Built Casing Layouts for

2 PA Marcellus Wells That

Contaminated Water Wells

44

45

Natural Gas Price is Volatile

46

$3.96 Today

MIT Study On Economics of Shale Gas

47 Jacoby et al., Economics of Energy & Environmental Policy, Vol. 1, No. 1, pp. 37-51, 2011

$3.96 Today

MIT Study on Economics of Shale Gas Wells

48 Jacoby et al., Economics of Energy & Environmental Policy, Vol. 1, No. 1, pp. 37-51, 2011

49

Time scale GWP heat/ Methane Methane (years) electricity from gas from coal (gC/MJ) (gC/MJ) Howarth et al. 20 / 100 33 / 105 both 0.56 – 1.3 0.045 – 0.14 Hughes 20 / 100 33 / 105 both 0.56 – 1.3 0.045 – 0.14 Skone 100 25 electr. 0.34 0.17 Jiang et al. 100 25 electr. 0.40 Not reported Worldwatch 100 25 electr. 0.34 0.094 Wigley 0 – 200 n/a electr. 0.34 – 1.4 0.107 U.S. EPA (2011) n/a n/a n/a 0.75 0.04

Comparison of Modeling Assumptions and Key Results

50

51

1. Howarth R W, Santoro R, Ingraffea A. Clim. Change 106, 679–690 (2011).*

2. Skone T.

http://cce.cornell.edu/EnergyClimateChange/NaturalGasDev/Documents/PDFs/SKONE_NG_L

C_GHG_Profile_Cornell_12MAY11_Final.pdf

3. Hughes D. Post Carbon Institute, 2011; http://go.nature.com/gkboqm

4. Osborn S G et al. Proc. Natl Acad. Sci. USA, 108, 8172–8176 (2011). *

5. Kumar S. WorldWatch Institute, http://www.worldwatch.org/despite-methane-emissions-

upstream-natural-gas-cleaner-coal-life-cycle-basi.s

5. Jiang M et al. Environ. Res. Lett. 6: 034014 (2011).*

6. Wigley T. Clim. Change (2011). DOI 10.1007/s10584-011-0217-3.*

7. Hultman N et al. (2011). Environ. Res. Lett. 6: 044008,doi:10.1088/1748-9326/6/4/044008*

8. Cathles LM et al. Clim. Change (2012) DOI 10.1007/s10584-011-0333-0. *

9. Howarth R W, Santoro R, Ingraffea A. Clim. Change, In press, 2012. *

Many Reports/Papers Since April, 2011

* = Peer Reviewed

52

The Cathles et al. Paper: Our Cornell Colleagues’ Criticisms of Our 1st Paper

53

1) a physical argument that large flows of gas are not possible

while frac fluids fill the well;

2) an assertion that venting of methane to the atmosphere

would be unsafe;

3) a statement that we incorrectly used data on methane

capture during flowback to estimate venting;

4) an assertion that venting of methane is not in the economic

interests of industry.

Our 2nd Paper Refutes These Arguments, And Provides New Supporting Data

1) a physical argument that large flows of gas are

not possible while frac fluids fill the well.

Large flows do occur because flowback is two-

phase, not dissolved gas; and there is 10 to 100

times more flowback from shale wells than

from conventional wells.

54

2) an assertion that venting of methane to the atmosphere

would be unsafe.

EPA (2011) reports 85% of flowback gas from

unconventional wells is vented, less than 15% flared or

captured; methane density only 58% that of air and is

extremely buoyant when vented (recall video); venting

is NOT illegal:“excess gas encountered during drilling,

completion or stimulation shall be flared, captured, or

diverted away from the drilling rig in a manner than

does not create a hazard to the public health or safety”

55

Our 2nd Paper Refutes These Arguments, And Provides New Supporting Data

56

3) a statement that we incorrectly used data on methane

capture during flowback to estimate venting.

We used data on captured gas as a surrogate for vented

emissions, similar to EPA (2010) because industry does

not measure or estimate the gas that is vented during

flowback. Most data we used were reported to the EPA

as part of their “green completions” program, and they

provide some of the very few publicly available

quantitative estimates of methane flows at the time of

flowback. (Note new EPA regulations start in 2012).

Our 2nd Paper Refutes These Arguments, And Provides New Supporting Data

57

Our 2nd Paper Refutes These Arguments, And Provides New Supporting Data

4) an assertion that venting of methane is not in the economic

interests of industry.

According to EPA (2011b), break-even price at which the cost

of capturing flowback gas equals market value of captured gas

is slightly under $4/Mcf. See next slide.

58

Time scale GWP heat/ Methane Methane (years) electricity from gas from coal (gC/MJ) (gC/MJ) Howarth et al. 20 / 100 33 / 105 both 0.56 – 1.3 0.045 – 0.14 Hughes 20 / 100 33 / 105 both 0.56 – 1.3 0.045 – 0.14 Skone 100 25 electr. 0.34 0.17 Jiang et al. 100 25 electr. 0.40 Not reported Worldwatch 100 25 electr. 0.34 0.094 Wigley 0 – 200 n/a electr. 0.34 – 1.4 0.107 U.S. EPA (2011) n/a n/a n/a 0.75 0.04

Comparison of Modeling Assumptions and Key Results

59

60

61

Nobel Winner F. Sherwood Rowland: On The Responsibility of Scientists

62

“Is it enough for a scientist simply to publish a paper? Isn’t it a

responsibility of scientists, if you believe that you have found

something that can affect the environment, isn’t it your responsibility

to actually do something about it, enough so that action actually takes

place?...If not us, who? If not now, when?”

Rowland, at a White House climate change roundtable in 1997.

http://thinkprogress.org/romm/2012/03/12/442296/sherry-rowland-sounded-alarm-ozone-layer/#more-442296

This is called science-based advocacy

Waste Injection Wells: The Hidden Risks of Pumping Waste Underground

63

A ProPublica review of well records, case histories and government

summaries of more than 220,000 well inspections found that structural failures

inside injection wells are routine. From late 2007 to late 2010, one well

integrity violation was issued for every six deep injection wells examined —

more than 17,000 violations nationally. More than 7,000 wells showed signs

that their walls were leaking. Records also show wells are frequently operated

in violation of safety regulations and under conditions that greatly increase the

risk of fluid leakage and the threat of water contamination.

Structurally, a disposal well is the same as an oil or gas well. Tubes of

concrete and steel extend anywhere from a few hundred feet to two miles into

the earth.

http://www.propublica.org/article/injection-wells-the-poison-beneath-us

Operators are required to do so-called "mechanical integrity" tests at regular

intervals, yearly for Class 1 wells and at least once every five years for

Class 2 wells. In 2010, the tests led to more than 7,500 violations nationally,

with more than 2,300 wells failing. In Texas, one violation was issued for

every three Class 2 wells examined in 2010.

64

Industry Performance in NYS: Plugging Abandoned Wells

65

“…of 48,000 abandoned oil and gas wells total,

13,000 were plugged and approximately

35,000 were not plugged as of 1994 …”

Bishop, HISTORICAL ANALYSIS OF OIL AND GAS WELL PLUGGING IN NEW YORK: IS THE

REGLATORY SYSTEM WORKING?, NEW SOLUTIONS, 23(1) 103-116, 2013

Wellbore Integrity: Recent Operator Performance in the Pennsylvania Marcellus Play

66

1,609 wells drilled in 2010. 97 well failures.

6% rate of failure.

1,972 wells drilled in 2011. 140 well failures.

7.1% rate of failure.

1346 wells drilled in 2012

120 well failures. 8.9% rate of failure.

Consistent with previous industry data, and not improving.

Palepko data

What Are the Implications of

Leaking Wells?

67

Each leaking well has the potential for contamination of one

or more private or public water sources, and will leak volatile

organic compounds into the atmosphere.

High Volume Hydraulic Fracturing Proposed Regulations 6 NYCRR Parts 550-556, 560

Among My Comments and Recommendations

68

Recommendation: As a minimum, DEC should perform and publish its own

statistical analysis of documented incidents of hydrocarbon migration into

underground sources of drinking water in the Marcellus play in Pennsylvania,

and develop its own prediction of immediate and long-term rate of well failures

for shale gas development in New York.

Recommendation: It is not possible to perform a rational cost-benefit

analysis of shale gas development in New York without a science-based,

probabilistic estimate of the number of expected well contamination incidents

due to faulty wells. DEC should estimate the cost associated with mitigation of

such contamination in its economic analysis of shale gas development. Each

leaking well will, unless completely stopped from leaking natural gas, contribute

to methane emissions and exacerbation of climate change. DEC should estimate

the impact of such emissions on NYS goals for reduction of CO2eq .

69

Our Energy Plan for New York State

Jacobson et al., Energy Policy, Feb. 2013

Natural Gas Price is Volatile and Will Inevitably Rise, As Will the Price of Oil

70

$3.96 Today

We Own the Wind, the Sun, the

Water: Their Fuel Cost is Zero.

71

Wind, water and solar energy will provide a stable, renewable

source of electric power not subject to the same fuel supply

limitations as fossil fuels and nuclear power. Due to the

eventual depletion of coal, oil, natural gas, and uranium

resources, their prices will continue to rise.

We Own the Wind, the Sun, the

Water: They Make Us Energy

Secure and Independent

72

Fuel Type

Projected Changes in Fuel

Cost, 2009-2030

(2009 dollars/MMBTU)

2009

2030

Percent Change Gasoline – all grades

$19.30

$40.39

109%

Natural Gas - Electric Natural Gas – Residential

$6.30

$13.58

$10.14

$16.19

27%

19%

Natural Gas – Commercial Natural Gas – Industrial

$10.27

$8.73

$13.06

$11.98

27%

37%

Projected Unit Costs of Selected Conventional Fossil Fuels

Over the Period 2009-2030 in NYS.

Source: NYSEPB (2009), Energy Price and Demand Long-Term Forecast (2009-2028). Annual

growth rate factors provided in reference document have been extrapolated for the period 2029-2030.

Externality Costs for Fossil Fuel Generation

The hidden costs of:

• Air pollution morbidity and mortality

• Water pollution costs

• Global warming damage. e.g. coastline loss, agricultural and fish losses, human heat stress mortality, increases in severe weather and air pollution

• Worker health

73

74

Energy Technology

2005-2012*

2020-2030*

Wind Onshore

4a -10.5b

≤ 4a

Wind Offshore

11.3c -16.5b

7b-10.9c

Wave

>11.0a

4-11a

Geothermal

9.9-15.2b

5.5 -8.8g

Hydroelectric

4.0-6.0d

4a

CSP

14.1-22.6b

7 -8a

Solar PV (Utility)

11.1-15.9b

5.5g

Solar PV (Commercial Rooftop)

14.9-20.4b

7.1-7.4h

Solar PV (Residential Rooftop)

16.5-22.7e

7.9-8.2h

Tidal

>11.0a

5-7a

New conventional (plus externalities )f

9.6-9.8 (+5.3) =

14.9-15.1

12.1-15.0 (+5.7) =

17.8-20.7

Approximate fully annualized generation and short-distance

transmission costs for WWS and new conventional power

(2007 U.S. cents/kWh-delivered), including externality costs.

Not Much Respect for You from EXXON Mobil CEO

75

“Now, with these new technologies that evolve always come a lot of

questions. Ours is an industry that is built on technology, it's built on

science, it's built on engineering, and because we have a society that

by and large is illiterate in these areas, science, math and engineering,

what we do is a mystery to them and they find it scary. And because of

that, it creates easy opportunities for opponents of development, activist

organizations, to manufacture fear.”

Rex W. Tillerson, Chairman and CEO,

Exxon Mobil Corporation

June 27, 2012

Council on Foreign Relations

Easy for Him to Say

76

“…And as long as we as an industry follow good engineering practices and

standards, these risks are entirely manageable. And the consequences

of a misstep by any member of our industry -- and I'm speaking again about

the shale revolution -- the consequences of a misstep in a well, while large

to the immediate people that live around that well, in the great scheme of

things are pretty small….”

Rex W. Tillerson, Chairman and CEO,

Exxon Mobil Corporation

June 27, 2012

Council on Foreign Relations

EXXON Mobil CEO on Global Warming

77

“…And as human beings as a -- as a -- as a species, that's why we're all still

here. We have spent our entire existence adapting, OK? So we will adapt

to this. Changes to weather patterns that move crop production areas

around -- we'll adapt to that. It's an engineering problem, and it has

engineering solutions. And so I don't -- the fear factor that people want to

throw out there to say we just have to stop this, I do not accept. I do believe

we have to -- we have to be efficient and we have to manage it, but we also

need to look at the other side of the engineering solution, which is how are

we going to adapt to it. And there are solutions. It's not a problem that we

can't solve.”

Rex W. Tillerson, Chairman and CEO,

Exxon Mobil Corporation

June 27, 2012

Council on Foreign Relations

EXXON Mobil CEO on Journalists

78

“…But this is an ongoing dialogue I've been having with people in your

profession now for some time; that for whatever reason, a large number of

people in the journalism profession simply are unwilling to do their work.

They're unwilling to do the homework. And so they get something delivered

to them from the manufacturers of fear; it makes a great story. I mean, it –

I mean, it does. It makes a great story. People love that kind of stuff. The

consuming public loves it, because it goes to what, you know, their fears are.”

Rex W. Tillerson, Chairman and CEO,

Exxon Mobil Corporation

June 27, 2012

Council on Foreign Relations

Exxon Mobil CEO: Farmer Joe Is a Liar

79

“…There are a lot of sources of science-based information. There are a lot of

sources that can debunk claims that are made specific -- you know, specific

examples. Farmer Joe lit his faucet on fire, and that's because there was

gas drilling going on, you know, in his back porch. And we can go out there

and we can prove with science that that is biogenic gas; it's been in the

water table for millions of years; it finally made its way Farmer Jones'

faucet, it had nothing to do with any oil and gas activities. And part of when

you're dealing with the subsurface strata is you've got to -- you got to understand

that Mother Nature has done a lot of things in the subsurface that have nothing

to do with anything man has done. And it changes. It moves around all the

time. So what once was will change.”

Rex W. Tillerson, Chairman and CEO,

Exxon Mobil Corporation

June 27, 2012

Council on Foreign Relations

EXXON Mobil CEO Correct on Shale Gas Economics

80

“The higher volumes are not only the result of drilling in the higher Btu

area, but are also the result of drilling longer laterals and

completing them with more frac stages. We’ve also experimented

with reduced cluster spacing, decreasing the frac interval from 300

feet to 150 to 200 feet, all of this looks very promising.” Once we

extract ethane beginning late next year, this will further enhance the

economics.”

“…And what I can tell you is the cost to supply is not $2.50. We are all

losing our shirts today. You know, we're making no money. It's all in the

red.”

Charlie Rose Talks to ExxonMobil's CEO Rex Tillerson By Charlie Rose on March 07, 2013 Biz Week

81

Whether it’s Alaska or offshore or wherever it may be, is your philosophy “Drill, baby, drill!”? No. My philosophy is to make money. If I can drill and make money, then that’s what I want to do. For us, it’s about making quality investments for our shareholders. And it’s not a quality investment if you can’t manage the risk around it.

How much longer do you think we’ll be burning fossil fuels? When coal came into the picture, it took about 50 or 60 years to displace timber. Then crude oil was found, and it took 60, 70 years, and then natural gas. So it takes 100 years or more for some new breakthrough in energy to become the dominant source. Most people have difficulty coming to grips with the sheer enormity of energy consumption. If we look at our energy outlook, at things like renewable wind, solar, biofuels, we have those sources over the next 30 years growing 700 to 800 percent. But in the year 2040, they’ll supply just 1 percent.

Ithaca JOURNAL, LAST WEEK!

82

NO to HVHF, YES to

a Much Better Plan

A peer-reviewed journal paper in

Energy Policy, March, 2013, by:

“Examining the Feasibility of

Converting

New York State’s All Purpose Energy

Infrastructure to One Using Wind, Water,

and Sunlight”

Jacobson, Howarth, Delucchi, Scobie,

Barth, Dvorak, Klevze, Katkhuda,

Miranda, Chowdhury, Jones,

Plano, Ingraffea

The plan would:

• Reduce NYS’s end-use power demand ~37%.

• Stabilize energy prices since fuel costs would be zero.

• Create more jobs than lost because nearly all NYS energy would

now be produced in-state, ~58,000 new, permanent, full-time jobs by

2025.

• Reduce NYS air pollution mortality and its costs by ~4000/yr,

and ~$33 billion/yr (3% of 2010 NYS GDP), respectively, repaying

the 271 GW installed power needed within ~17 y.

• NYS’s own emission decreases would reduce 2050 U.S. climate

costs by ~$3.2 billion/yr.

83

NO to HVHF, YES to a Much Better Plan

MYTH: WWS Take Use Too Much Space

84 Jacobson et al., Energy Policy, 2013

85

Wind Capacity Factors at 90-m Hub Height in NYS. Capacity factors of

30% or higher are the most cost-effective for wind energy development.

MYTH: IT Is Not Windy Enough in NYS

to Make Wind Energy Practical

Jacobson et al., Energy Policy, 2013

86

Germany Sets New Solar Record By Meeting Nearly Half

of Country’s Weekend Power Demand by Timon Singh, 05/31/12

“Germany fed a whopping 22 gigawatts of solar power per hour into the national grid

last weekend, setting a new record by meeting nearly half of the country’s weekend

power demand. The Renewable Energy Industry (IWR) in Muenster announced that

Saturday’s solar energy generation met nearly 50 percent of the nation’s midday

electricity needs and was equal to 20 nuclear power stations at full capacity.”

MYTH: IT Is Not Windy Enough in NYS

to Make Wind Energy Practical

78.73A - Operator shall prevent gas and other fluids from lower formations from entering fresh groundwater.

78.81D2 - Failure to case and cement properly through storage reservoir or storage horizon

78.83A - Diameter of bore hole not 1 inch greater than casing/casing collar diameter

78.73B - Excessive casing seat pressure

78.83 GRNDWTR - Improper casing to protect fresh groundwater

78.83 COALCSG - Improper coal protective casing and cementing procedures

78.85 - Inadequate, insufficient, and/or improperly installed cement

78.86 - Failure to report defective, insufficient, or improperly cemented casing

207B - Failure to case and cement to prevent migrations into fresh groundwater

Codes Used to Identify Wells with Violations

87

Recent Operator Performance in the Pennsylvania Marcellus Play: Examples of Inspection

Comments without Violation

88

“Check on flow back pressure on failed casing, no pressure on 5-1/2x9-5/8 annulus flowing at 3-4 barrels an hour”

“Stray gas observed. Inspected wellhead only. Purpose of inspection was not to address any open violations on pad.”

“Follow up on plugging of well. Since last inspection have run a CBL and Temp Log in 7" casing. Based on anomalies shown on logs - have perf'd and attempted to squeeze cement to eliminate bubbling at surface. At time of inspection tripping out of hole and will be perforating later today and will see if can establish injection rate and squeeze cement. Bubbling still present in cellar on 9 x 7" annulus. No violations observed at this time...”

2010 64 wells with violations, 47 additional wells with loss of integrity noted in Inspection Comments

2011 97 wells with violations, 45 additional wells with loss of integrity noted in Inspection Comments

2012 44 wells with violations, 76 additional wells with loss of integrity noted in Inspection Comments

Additional Counts of Wells with Loss of Integrity

89

Charlie Rose Talks to ExxonMobil's CEO Rex Tillerson By Charlie Rose on March 07, 2013 Biz Week

90

Whether it’s Alaska or offshore or wherever it may be, is your philosophy “Drill, baby, drill!”? No. My philosophy is to make money. If I can drill and make money, then that’s what I want to do. For us, it’s about making quality investments for our shareholders. And it’s not a quality investment if you can’t manage the risk around it.

How much longer do you think we’ll be burning fossil fuels? When coal came into the picture, it took about 50 or 60 years to displace timber. Then crude oil was found, and it took 60, 70 years, and then natural gas. So it takes 100 years or more for some new breakthrough in energy to become the dominant source. Most people have difficulty coming to grips with the sheer enormity of energy consumption. If we look at our energy outlook, at things like renewable wind, solar, biofuels, we have those sources over the next 30 years growing 700 to 800 percent. But in the year 2040, they’ll supply just 1 percent.

91 Photo Courtesy of Bob Donnan

Surface Impacts on Health/Environmental: Pads, Pipelines.

Impoundments, Flares

92

Surface Impacts on Health/Environmental: Pads and Pipelines

…and these will be located wherever permission is given

Photo Courtesy of Bob Donnan

93

Surface Impacts on Health/Environmental: Pads, Pipelines.

Impoundments

Photo Courtesy of Bob Donnan

94

CARTER IMPOUNDMENT, PA Marcellus

Surface Impacts on Health/Environmental: Waste Impoundments

Are needed even

with “recycling”

Photos Courtesy of

Bob Donnan

95

Buffalo, Pa, Compressor Station

Photo Courtesy of Bob Donnan

Surface Impacts on Health/Environmental:

Pipelines and Compressor Stations

Key Data for Estimation of Well Productivity and Economics: PA

96 From: Chesapeake Energy (CHK) published pro forma data

Horn River Area, NE British Columbia

97

98

In the large U.S plays, shale gas development has only just begun,

and it requires a large number of large, multi-well, clustered pads and

significant ancillary infrastructure